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By Atul Prakash
LONDON, April 23 (Reuters) - Gold shed more than 2 percent
on Wednesday as the dollar gained ground against the euro and
oil beat a retreat from record highs, traders said.
Spot gold <XAU=> sank to an intraday low of $897.10 an ounce
before steadying around 900.20/901.20 by 1428 GMT, well below
levels of $920.65/922.05 seen late in New York trade on Tuesday.
People were unwinding their long positions on gold, after
the metal's recent rally, said analyst Daniel Hynes of Merrill
Lynch:
"We've seen net long positions on the COMEX decrease
recently and I think we're seeing a continuation of that
movement out of gold just at the moment," he said.
Gold held in New York-listed StreetTRACKS Gold Shares, the
world's largest gold-backed exchange-traded fund, fell to 623.41
tonnes on Tuesday from 641.82 tonnes the previous day.
The metal hit a three-week high of $952.60 last week but
attempts to stay above $950 were met by profit-taking. Dealers
noted some physical demand but it was not enough to trigger
another rally towards last month's record high of $1,030.80.
"In the near-term, gold is likely to continue to take its
lead from dollar movements," said Suki Cooper, precious metals
analyst at Barclays Capital.
The euro pulled back from a record peak versus the dollar
after a fall in manufacturing activity suggested that economic
growth in the euro zone is starting to slow.
A firmer dollar makes gold costlier for holders of other
currencies and often lowers bullion demand. The metal is also
generally seen as a hedge against oil-led inflation.
RANGE-BOUND TRADE
Oil eased to under $118 a barrel, but stayed on the boil due
to supply disruptions in Nigeria and fears that a refinery
strike in Scotland could hit production in the North Sea.
"Higher oil prices should increase near-term inflation
expectations, which might leave some room for near-term upside
potential for commodities," analysts at Standard Bank said.
"However, continued fund liquidation signals that most
investors remain on the sidelines because of uncertainty in
financial markets. Precious metals should remain range-bound
ahead of the Fed interest rate decision due next week."
The U.S. Federal Reserve is expected to lower interest rates
from the current 2.25 percent.
A rate cut tends to lower the dollar's appeal, which in turn
often lifts bullion demand.
Platinum <XPT=> fell 2 percent to $1,975.50 an ounce on the
back of the declines in gold, and was later at $2,002.50/2012.50
against $2,017.50/2,027.50 previously.
News that Lonmin Plc, the world's third biggest platinum
producer, had again cut its full-year sales target following
power problems in South Africa had little impact on prices, said
Hynes from Merrill Lynch.
"I think a large amount of that was already priced into the
market. Other than that there is no real catalyst so it is
tending to drift with gold," he said.
Platinum also faced pressure from news that Mitsui Mining
and Smelting had developed a new catalyst for diesel engine cars
that replaces the use of platinum with silver, a less
conventional but much cheaper metal.
Silver <XAG=> edged down to $17.17/17.23 an ounce from
$17.64/17.73, while palladium <XPD=> was off at $445.50/451.50
versus $451/457.
(Reporting by Atul Prakash and Tamora Vidaillet; editing by
Chris Johnson)
